ELS Europe is pleased to have provided our inputs to the European Commission regarding Europe’s climate resilience and risk management framework.  Our comments focus on three critical areas (1) adhering to sustainable finance principles, (2) scaling up climate resilience finance at pace, and (3) transparency for all stakeholders to make informed decisions about their financial lifecycle.

(1) Adhering to the EU’s Sustainable Finance principles

Climate resilience is an integral part of sustainable development but may also be a component of development that is not sustainable, such as where climate adaptation efforts cause harm to other environmental or social objectives, or to the adaptation efforts of others. Examples are financial instruments, such as investment portfolios, loans or insurance products that support the climate resilience of:

• a fossil fuel exploration activity and significantly harming the mitigation objective;
• a facility that causes significant harm to water resources;
• projects or companies that participate in undermining minimum social safeguards and respect for human rights.

For these and more reasons, all financial instruments which support climate adaptation and resilience efforts of private and public actors must adhere to the key principles of the EU’s Sustainable Finance framework, including the do no significant harm (DNSH) principle, and minimum social safeguards such as are detailed in the EU Taxonomy Regulations and Annexes.

(2) Scaling up Climate Resilience Finance at pace

Climate resilience finance, referring to a wide variety of financial instruments distributed to large companies, small to medium sized enterprises (SMEs), and public entities, are necessary to address climate risks. Such finance is a key part of Europe’s climate resilience toolbox including loans, investments, pensions, EU Green Bonds, and insurance products.

Globally, adaptation costs are estimated at around 10–18 times as much as current flows of international public adaptation finance. The finance gap is even greater in the private sector where less than 2% of climate resilience finance comes from private sources. The European Commission’s Climate Resilience Dialogue Report acknowledges that early investment in climate resilience saves up to ten times in avoided future losses and this needs to be recognised as a return both in a business and a wider economic sense. Compounding the issues are the ongoing delays in decarbonisation, in particular at the global level, which are pushing up transition and adaptation costs even further.

Climate risks and impacts already affect the entire EU territory more than any other region. The frequency and intensity of climate-driven natural disasters in Europe are increasing. At the same time, growth, increased urbanization and associated asset value creation are increasing the economic loss values. During 2024 the annual cost of flooding alone in Europe was estimated at €15.6 bn with a five-year moving average of €19 bn and growing.

Clearly, public and private finance for climate resilience need to be scaled at pace. Where feasible, action should be undertaken jointly in public-private partnerships to enhance knowledge exchange and risk-sharing and counter delays.

Whether for private, public or joint climate resilience efforts, lenders, investors and re/insurers have a critical role in the provision of climate resilience support along with companies, EU institutions, government organisations and citizens. Initiatives that engage financial organisations with risk management efforts of companies and public bodies for practical implementation of climate resilience measures both physical and behavioral, need to be prioritised.

(3) Transparency for stakeholders to make informed decisions about their financial lifecycle.

For companies to protect their long-term viability and competitiveness, they must effectively manage their climate-driven financial risks and liabilities. They must also be transparent about their actions so that investors and other stakeholders understand how and to what extent they are prepared for climate change, as well as their overall environmental and social performance. The European Sustainable Finance framework including the Sustainability Reporting Standards and the EU Taxonomy are key instruments and guides to companies, whether used as mandatory or voluntarily.

Every choice a person makes concerning their finances can be used for long-term positive impacts and benefits for businesses, communities, and the natural and built environments.

Companies have obligations not only to investors but to other stakeholders such as employees and customers, who as workers, spenders, savers, investors, and pension holders need to readily access information. It is questionable whether information made available through the Sustainable Finance framework is currently sufficient to allow employees for example, to make informed and actionable decisions about their company pension investments.

The integrated framework must ensure that the financial lifecycle of EU citizens, as key stakeholders of companies, as well in their own right, is considered in the transparency requirements of financial and non-financial key actors.